Entirety of net proceeds used for debt paydown, resulting in post-divestiture leverage multiples closer to ADT’s stated goal of sub-3.0x net debt / Adjusted EBITDA. ADT strengthens focus on innovation and growth in core residential, small business and multifamily consumer markets
ADT, the most trusted brand in smart home and small business security, today announced that it has entered into a definitive agreement to sell its commercial security, fire and life safety business unit to GTCR, a leading private equity firm, for a purchase price of $1.6 billion, subject to customary purchase price adjustments. Proceeds from the sale, which is expected to close in the fourth quarter of 2023, will be used to reduce debt by $1.5 billion, with cash interest savings expected to offset the impact of divesting the commercial business.
- The transaction supports ADT’s journey to be the premier provider of smart home and residential solar solutions by leveraging our strategic differentiators: innovative offerings, unrivaled safety and premium customer experiences.
- With a stronger financial profile, ADT will be better positioned to prioritize investments that we believe will drive profitable, capital-efficient revenue growth for the long term.
- At the close of the transaction, ADT plans to use the net proceeds from the transaction for debt reduction, resulting in a meaningfully lower leverage profile, improved margins and strong free cash flow generation.
- Represents an attractive EV/Commercial Adjusted EBITDA multiple of approximately 11.2X1 including the estimated allocation of corporate costs.
- Estimated cash interest savings from debt paydown approximately offsets the impact of divesting the commercial business.
- Upon completion of the sale, ADT plans to use the net after-tax cash proceeds of approximately $1.5 billion for significant debt reduction, accelerating long-term leverage goals and improving our leverage ratio from the current level of 3.7 down to 3.3.
- ADT’s capital allocation priorities remain unchanged; the company does not plan to change its quarterly dividend.
Jim DeVries, ADT President and CEO, said, “The decision to divest ADT’s commercial business is a value-enhancing transaction that focuses our portfolio on growth opportunities in our consumer markets. The sale enables ADT to monetize the commercial business at an attractive valuation and accelerate our debt reduction goals. With greater financial flexibility, we will be better positioned to grow through our strategic differentiators and innovative offerings, including our partnerships with Google and State Farm. We will continue our journey to be the premier provider of safe, smart and sustainable solutions that meet the evolved definition of what safety means to consumers today.”
DeVries continued, “This transaction is mutually beneficial for ADT and ADT Commercial, which will benefit from GTCR’s support and expertise, positioning the business to continue providing best-in-class solutions and services to its customers. We thank the entire ADT Commercial team for their hard work and look forward to seeing them grow.”
“ADT Commercial has established itself as an innovative leader in providing the critical safety services that businesses need to protect their day-to-day functionality,” said David Donnini, Managing Director and Head of Business & Consumer Services at GTCR. “We are very proud to once again partner with the leadership team of ADT Commercial to continue to invest in the platform and deliver the solutions its customers have come to expect. ADT has done a tremendous job in further developing this segment in recent years and we are excited to help drive the business forward in its next chapter of growth.”
Upon closing of the transaction, ADT expects to receive approximately $1.5 billion in net proceeds, subject to final tax calculations and purchase price adjustments. ADT plans to use the net after-tax cash proceeds of the transaction to reduce debt. As adjusted for the transaction, ADT expects its net leverage ratio to be 3.3, down from 3.7, currently.
The transaction has been approved by ADT’s Board of Directors and is expected to close in the fourth quarter of 2023, subject to customary closing conditions, including regulatory approvals.
As previously announced, ADT will hold a live conference call and webcast at 10 a.m. ET today to discuss its second quarter financial results and will at that time provide additional information on the transaction. Participants may listen through the investor relations website at investor.adt.com. A replay of the webcast will be available on the website within 24 hours of the live event.
Alternatively, participants may listen to the live call by dialing 1-888-660-6144 (domestic) or 1-929-203-0865 (international) and requesting the ADT Second Quarter 2023 Earnings Conference Call. An audio replay will be available for two weeks following the call and can be accessed by dialing 1-800-770-2030 (domestic) or 1-647-362-9199 (international) and providing the passcode 5974526.
Citi and RBC Capital Markets are acting as financial advisors to ADT. Cravath, Swaine & Moore LLP is acting as legal advisor to ADT.
1 EV/Commercial Adjusted EBITDA is a non-GAAP measure. Refer to the reconciliations that follow for the presentation of the most comparable GAAP measure along with the GAAP to non-GAAP reconciliation.
ADT provides safe, smart and sustainable solutions for people, homes and small businesses. Through innovative offerings, unrivaled safety, and a premium customer experience, all delivered by the largest network of smart home security and rooftop solar professionals in the U.S., we empower people to protect and connect to what matters most. For more information, visit adt.com.
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